03 Steps to Validate ONLINE BUSINESS IDEA: Check FINANCIAL FEASIBILITY

There are generally three ways to validate your online business idea - demand, competition, and financial feasibility. In this article, we intend to discuss financial stability. The ability of any business project to generate sufficient income, credit, and cash flow to sustain itself financially over the long term is referred to as its financial feasibility.

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When it comes to online business, you might wonder about the major recurring investment in an Online Business. An online business cannot happen without digital marketing. It plays a key role in the success of any online business due to its ability to connect a business with its customers online, as well as being effective in all industries. Using SEO & PPC, social media marketing, and email marketing, it connects businesses with the right customers on Google.

How to allocate your finance?

When you talk about finance your allocation towards digital marketing has to be done in the right manner and which helps you to generate more sales. If you have sales in business your other costs are valid and less sales mean there will be problems in covering costs which may even lead to shutdown of your business. You should always ensure best ROI from digital marketing. A case study says that about 35 percent of the eCommerce business fails due to lack of their online visibility, that means there digital marketing was wrong and theri money spent hads gone in vain. So generally the cycle is - they start- procure/develop offerings - build an online platform but do not invest the right amount and energy in digital marketing which leads to failure.

The Rightful Strategy

It is very important for you to analyze where does your offering stands. That means the product you wish to sell, where does it stands between the red ocean and blue ocean. These terms might confuse you but they are taken from a theory where they are used as a metaphor. Lets suppose your business resembles a ship and it is spotted in a red ocean that means you are trying to compete in a very high competitive marketplace or sector. To survive in the red ocean you will need a large amount of digital marketing investment. Also, if you plan to take your business highland and not invest rightly in digital marketing then there is a hundred percent chance that your ship is going to sink in the red ocean. This is the major mistake done by major of the ecommerce operators. If you know you are going into the red ocean be prepared for a high amount of investment in digital marketing, for budget you could always try to raise investment. It is not that the red ocean is bad for business. If you wish to typically grow your business organically then find something in the blue ocean. You may be wondering how to identify blue ocean, by finding the right niche or creating your own niche .

To understand better let us discuss the case study of artificial jewllery - now it is in red ocean today as it is a highly competitive market, if you have big investors you should go bang on with the business but if you lack proper budget for digital marketing it is advisable not to enter that particular marketplace. If you are a bootstrap then try to get your business from red ocean to blue ocean. Wondering how to do that? It can be easy with creativity, lets say start with a brand which offers artificial jewellery for kids. So, as to start with there is a lesser competition and you could properly tell the customers about the unique features of your products such as an alternate to higher priced products or their safety standards, etc.

How to identify your niche is also an important step for a succesful online business venture. Once demand, competition and the ocean your products might belong to is analyzed, it would be very easy to develop your online business model ( https://www.yourretailcoach.in/business-model-development/ ).

-> Capital investment : Business investments include land, machinery, buildings, and other fixed assets.
-> Operating cost : Operating costs are the costs associated with running a business on a daily basis. It consists of both costs of goods sold (COGS) and other expenses
-> Projected sales (03 years) : It's a way for companies to estimate how much revenue they'll earn by a set date. They also provide insight into the health of the business as a whole. You should have a sales projection for atleast three years.
-> Margins : Margin is the difference between what an online retailer charges and what his or her customers pay. Your business will benefit from a higher figure.
-> Break-even sales : Your break-even sales volume is the quantity of product you will have to produce and sell to cover your total production costs.
-> Revenue : In business, revenues are defined as the total amount of money that a company receives from customers in exchange for its products or services.
-> ROI : A return on investment (ROI) can be used as a measure of its profitability. Investment ROI measures the return on investment based on the costs involved.
-> Tax calculations : You can evaluate different investments in terms of the least amount of tax to be paid when selling them.
-> Gross & Net profits : When a business's gross income is reduced by taxes, overheads, interest payments, and expenses, it becomes its net income.

It is always advisable to not dive in before analysing the above mentioned points, always wear a white hat when you enter into any business.

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Why YRC
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YourRetailCoach
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Empowering Retail & E-commerce businesses worldwide.

YRC is a Management Consulting Firm with its presence across India & Dubai.
We help our clients build robust management systems which shall help to reduce their involvement in daily operations. We act as "Growth Partners" to our clients and help our clients grow in an organised manner. We have served more than 100 brands till date and are associated with 85% of them.

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